Brexit

The consequences of last week's referendum, in which the United Kingdom voted in favor of leaving the European Union, will be a leading source of concern for the European aviation market for the foreseeable future. IATA already has a brief report available on the potential consequences for airline traffic and regulation. Other sources had earlier written about the potential consequences in anticipation of this possibility, and those analyses should prove useful now that the decision to leave has been made. Even when restricting one's examination solely to the consequences for the aviation sector, ignoring knock-on effects from developments in the currency markets or changes to customs policy, the potential complications arising from the referendum are enormous. The following, non-exhaustive list offers some quick thoughts on the most important legal and policy questions that will need to be resolved with regard to aviation:

• Traffic rights with the EU. The immediate assumption since last Thursday's referendum has been that the United Kingdom will want to maintain as much of its existing trade relationships with the EU as possible, but that the EU will be loathe to allow unfettered access to its markets without an agreement that also includes free movement of persons and labor, a concession that is likely to be highly politically problematic for the new UK government. Aviation is one area where an agreement may be reachable despite this impasse, as the EU has been willing to extend the liberal terms consistent with membership in the European Common Aviation Area (ECAA) to even those neighboring States with which the EU still has barriers to immigration. Unrestricted access to the EU market is of fundamental importance to British carriers, particularly EasyJet, which may seek to open European affiliates should European traffic rights be threatened. Of course, the competitive threat posed by British carriers may provoke greater resistance than is typical for expansion of the common aviation market to smaller, less threatening neighbors.
• Traffic rights with the rest of the world (particularly the U.S.). Of nearly equal importance will be the establishment of new Air Services Agreements with those non-EU countries with which the UK had been relying on it's membership in the EU as part of broader, multilateral agreements. The most prominent example being the US-EU Open Skies Agreement. Non-EU States such as Norway, have been allowed to sign on as parties to these agreements, so perhaps the UK's status with regard to these treaties could be reconfirmed relatively unchanged. If, however, a new agreement must be negotiated from scratch, access to Heathrow could reemerge as a source of conflict.
• Ownership and control - Community carrier clause. Perhaps more than even the full grant of all nine freedoms of the air, the creation of the idea of a "community carrier" reflecting the internal abolition of restrictions on airline ownership and control, has been the signature advance enabled by the integration of the European aviation market. British Airways' parent company, IAG, of course also owns Spain's Iberia. Airline ownership groups have grown quite adept in recent years at organizing their holdings to work around the industry's antiquated limits on cross-border ownership, but this is at least one more complication that will require attention.
• Participation in EASA and airworthiness certification. The UK is at present a member of the European Aviation Safety Agency (EASA), which consists of all EU Member States along with Switzerland, Norway, Iceland, and Liechtenstein. This relationship is an integral part of the UK's ability to administer a safe airspace. The UK Civil Aviation Authority relies on EASA's work when issuing airworthiness certificates to aircraft and the UK observes the so-called blacklist EASA produces for foreign carriers that fall short of compliance with international safety standards. Detaching itself from this relationship would require a significant expansion of resources and capacity for UK air safety administration.
• Participation in the Single European Sky (SES). Despite continuous delays, the Single European Sky initiative promises to eventually revolutionize the management and regulation of European airspace. As long as the UK remains in the ECAA, the consequences on SES should be minimized.